We know that the topic of inflation is being pretty well beaten to death as it hits 20 year highs, but bear with us for one more article about it.
Below is a representation of how inflation eroded the value of $100 over 70 years.
Purchasing power of $100 over time:
1950 - $100
1960 – $80.41
1970 - $61.34
1980 – $28.88
1990 – $18.21
2000 - $13.82
2010 – $10.91
2021 – $8.70
It’s the same story, but a powerful visual. You need 11.5x the money you had in 1950 to have the same purchasing power in 2021.
You can also see how the hyperinflation in the 70’s sped up the process of devaluing money compared to other decades.
This concept is so important because it is the whole reason that we endure the ups and downs of the market and put our hard-earned money at risk in investments.
When inflation is high, current dollars are worth more than future dollars, so if we want that money to buy the same things, we need it to grow over time.